If the transports sector is a real-time barometer of economic health — with a majority of goods moved within the U.S. occurring via trucking carriers — then good times are to be had by all, right?
According to a study on domestic census data conducted by NPR, transports employees — specifically truck drivers — may be the top job category in the country.
Improvement in transports underline several key assumptions. Namely, that the American consumer is spending more on both necessities and discretionary items, thus lifting all boats. Further cementing the point, consumer sentiment has, on the whole, been rising noticeably from 2010 until now. Thus, it appears that there’s real weight to the bullish fundamentals of transports.
But try telling that to the markets!
Transportation stocks have been taking a beating, with the Dow Jones Transportation Average down almost 10% year-to-date. This is in stark contrast to the benchmark S&P 500, which, while not particularly great, is at least positive with a 3% YTD return.
Additionally, consumer sentiment and the granular details that comprise it are starting to show some questions themselves. Since peaking in February of this year, generally speaking, it has gradually declined. This is not the kind of confidence that typically emboldens a genuine bull market, and leads investors to shy away from transports.
Here are three major transportation stocks that are signaling concerns right now.
Transportation Stocks to Avoid: Swift Transportation (SWFT)
SWFT stock is one of the blue-chip laggards of this year, with its market value down 19% YTD.
The bean counters at Swift are certainly sweating bullets. Since the start of the spring season, SWFT stock has been hampered with three negative revisions in their financials. Wall Street analysts took note immediately, downgrading the consensus estimates for SWFT stock’s current year earnings.
Traders in the markets have been veritably brutal. Following some negative revisions, SWFT stock suffered a 6% drop for the May 29 session. Frustratingly, after a series of undulating trades over the next month-and-a-half, SWFT stock is essentially at parity with the aforementioned selloff date. While that’s not definitively bad news per se, it may simply be a rest stop ahead of an inevitable drop should Swift’s upcoming earnings report offer a negative surprise.
With ugliness in transportation stocks in general combined with Swift’s own lack of answers, investors might want to steer clear of SWFT stock.
Transportation Stocks to Avoid: J.B. Hunt (JBHT)
JBHT stock is also one of the few transportation stocks that is moving against the bearish grain of the Dow Jones Transportation Index, up 1% year-to-date.
Can JBHT stock continue to buck the trend? Notable analysts including Zacks Equity Research think so based on prior momentum. In the first quarter of fiscal 2015, earnings performance for J.B. Hunt exceeded Wall Street expectations to the tune of 8.3%. Furthermore, in the past four quarters, J.B. Hunt’s financials came out ahead of forecast consensus — so why bet against consistent bullishness?
However, the results in the markets — where it really matters for shareholders — has been to the contrary unimpressive. Since spiking up in mid-April of this year, JBHT stock has faltered, moving down 7%. Worrisome still is the 1% decline that occurred in the last trading session of June. Although the loss of market value was relatively minimal, the volume exponentially exceeded JBHT stock’s three-month average volume.
Wall Street’s utter confusion about how to deal with today’s earnings report — JBHT started off sharply, recovered to a 1% gain, then finished just about flat for the day — doesn’t inspire much confidence, either.
Transportation Stocks to Avoid: Marten Transport (MRTN)
On a YTD basis, MRTN stock is down 12%, all of it a result of unhappy traders punishing Marten Transport’s management team on July 15 in response to an earnings miss released the day prior. If not for that incident, we would be having a different discussion since MRTN stock would have outpaced transports with a 6% performance in 2015.
Sadly, the earnings miss was pretty bad. Although Marten Transport posted a profit in Q2 to the tune of $8.4 million, this translated to an earnings per share of MRTN stock of 25 cents. Wall Street’s consensus estimate called for an EPS of 30 cents, thus ending up with a negative surprise of 17%. With underlying economic implications weighing on the transports, MRTN stock investors panicked.
The technical performance was equally ugly. With the resultant selloff, Marten shares dropped well below their 50- and 200-day moving averages — barometers commonly observed by professional traders to gauge nearer- and longer-term momentum, respectively. Against the backdrop of the aforementioned spike in mid-April, MRTN stock has formed a decisively bearish trend channel. The bulls will quickly need to push MRTN back up to the $22 level to ameliorate the technical damage incurred from the poor earnings report.
Given the underperformance of transportation stocks, that may indeed be too tall of an order.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.